Sir Howard Stringer has stepped down as Sony's chief executive. Can his
replacement help the company recover from a $2bn loss?

Look around most living rooms and the chances are there’s a Sony product somewhere: whether it’s a television, a DVD player, an ageing video recorder or a hifi, the Japanese corporation has dominated consumer electronics for decades.

Recently, however, the company has struggled. Led until this week by Welshman Sir Howard Stringer, Sony has battled floods in Japan, a fire at its main warehouse in London, a rising Yen and a resolutely unprofitable TV business. While its profile remains high, the business has been under pressure. At this year’s Consumer Electronics Show in Las Vegas, the world’s biggest trade fair, one major retailer’s top buyer told me: “Panasonic are on the rise, Samsung are dominant – but I worry about Sony.” This week, the company announced a 17 per cent drop in sales and a $2billion loss.

With that in mind, the appointment this week of Kazuo Hirai as Sir Howard’s successor could be seen as an admission of defeat. In fact, however, analysts believe he may have turned around the battleship that is Sony and potentially left Hirai with a golden legacy.

Ben Wood, of CCS, says Sony is one of a new breed of “megacompanies with fingers in every pie”. Like Apple, Sony has access to music and movies – the firm owns its own studios – and it also makes hardware and software. Using tablets, TVs, mobile phones and more it ought to be well-placed for what Wood calls “the battle royale for control of the living room”.

Wood says Samsung, however, has a march on Sony because they’re “starting to join up the dots – connecting devices anytime, anywhere. Cameras, laptops even washing machines now talk the same language.” That means your Samsung camera or mobile phone will effortlessly display its pictures on your Samsung TV. Sony aims for the same vision.

Yet it’s mobile phones where Hirai must make real progress if that is to happen. Sir Howard had already placed him in charge of masterminding Sony’s first mobiles to escape the Sony Ericsson branding. He will have had one eye on Samsung’s balance sheet, where its class-leading S2 mobile phone led the telecommunications division to account for 37.8 per cent of total revenue – and 49 per cent of the profit.

As things stand, however, Sony hase hug presence primarily in dying business areas: Wood cites digital cameras, music players, media players and handheld gaming as areas that are set to struggle with competition from mobile phones. Hirai has previously run the successful PlayStation business. With videogames now bigger than music or film, this is only set to get more important, but the hardware itself is unlikely to become more profitable.

In his internal email to staff, Sir Howard claimed he saw early on that “Kaz was a convergence executive, one who understood the value of all that Sony has to offer, from electronics to entertainment.” He conceded, however, “We face serious challenges, but we have the right products, content and networks, the right strategy and the right people to surmount our difficulties and create a brighter future for all of Sony.”

Wood is ambivalent on that point: “Sony are running out of time in the face of rampant competitors such as Samsung and Apple who have understood the importance of convergence,” he says.

Yet it was Sir Howard who talked at length about making consumers realise that Sony was a company that sold movies, TV programmes and music as well as televisions and phones. One senior insider at the company admitted, “Kaz’s job is to make the software and the hardware completely integrated – to get the killer products back. He wants Sony to speed up and get ahead of things”.

That, of course, is easier said than done: but the company that invented the Walkman has, in some ways, even more assets than Apple itself. It would be a brave thing to bet against Sony – but then it might be braver still to think it can turn around that $2billion loss.